Not Buying Whatever You’re Selling (Market Wrap Up 05/11)

Many traders often do not need someone pressuring them to make trades when they have no edge. They do not even need “the wolf of Wall Street” in their faces giving them the hard sell on a stock, because they are too busy pressuring themselves to just do something…anything. With the current volatile, confused market full of broken charts, I find it difficult to see how a swing trader could be active in this environment. The indecisive action today should support my belief that the market is jumping around, scratching its head and figuring out what to do next.

Rather than shunning patience, a better approach would be to consider the capital you would have lost had you grown impatient. Sure, for daytraders there have been some good opportunities, but beyond scalping here and there, the market is still trying to decide where its next move is going to be. I expect to see more clues in the coming days, but I would rather be an objective observer via an outsized cash position, than be beholden to the violent, seemingly incoherent swings we have seen over the past few weeks.

For those of you who are struggling with keeping yourself from trading out of boredom, I would like to refer you to two pieces that I wrote over the past few months here and here, that will hopefully be helpful.

I will post some charts later this evening, but I wanted this post to capture more of the big picture and to make sure that we are always seeing the forest for the trees. I guarantee you there will be better swing trading setups in the future, but the real issue is whether you will have the ammunition to take advantage of the easy targets when they eventually present themselves, instead of having used it up in this current choppy market.

Yes. If you are in a very closely contested match and it is your move (you’re literally on the clock in a timed game), it is often correct to make a benign, almost “throw-a-way” move that has no material immediate impact on making your position stronger. An example would be if your King is already castled (safely protected) and you move him over one square, and then hit the clock and force your opponent to move. The idea is that you are willing to forego an offensive strike in order to not make a mistake, given the current state of the game. You wait for your opponent to show weakness, and only THEN do you pounce hard.